Category: Policy Updates

“Cadillac Tax” Will Hit 38 Percent of Employers in 2018

The “Cadillac tax” is the excise tax on high-value health plans, which goes into effect in 2018. If the value of health benefits exceeds $10,200 for an individual or $27,000 for a family, the excise will be taxed at 40 percent.

A new report from the American Health Policy Institute breaks down the effect on employers. As well as concluding that the Cadillac tax will hit 38 percent of employers in 2018, it estimates that the average employer-based policy will be subject to the tax by 2031.

There is no doubt the Cadillac tax will put an administrative burden on employers, and reduce the attractiveness of employer-based benefits. On the other hand, as the AHPI report notes, the Cadillac tax will cause employers to increase workers’ wages in exchange for reducing health benefits. Indeed, the Congressional Budget Office anticipates that 75 percent of the revenue due to the Cadillac tax will be from income and payroll taxes due to wage increases, and only 25 percent due to the Cadillac tax itself.

Right to Try Laws Now in 5 States

After this month’s elections, the number of states that have “right to try” laws for experimental drugs has hit five. One in ten states: Not bad for an effort run out of one think tank in Arizona.

However, I have seen no evidence that any manufacturer of an experimental drug is taking advantage of these laws to supply medicines to desperately ill patients in these states. This is understandable: Doling out the medicines to needy patients threatens the sanctity of clinical trials and, therefore, FDA approval.

Congress needs to reform the rules governing the FDA to make use of more real-world evidence in approving new medicines. This is statistically challenging and not to be undertaken lightly. Nevertheless, if more states pass “right to try” laws, I expect that Congress will see the necessity of action.

Say It Ain’t So! The Medical Device Excise Tax Doesn’t Hurt?

The medical-device excise tax, part of Obamacare, is a universally reviled 2.3 percent levy on medical devices. Many people think that it will finally be repealed, with Republicans in charge of both chambers.

Now, along comes the Congressional Research Service to pour cold water on the idea that the tax is a job killer. The writers agree that the tax makes no economic sense:

Viewed from the perspective of traditional economic and tax theory, however, the tax is challenging to justify. In general, tax policy is more efficient when differential excise taxes are not imposed. It is generally more efficient to raise revenue from a broad tax base. Therefore excise taxes are usually based on specific objectives such as discouraging undesirable activities (e.g., tobacco taxes) or funding closely related government spending (e.g., gasoline taxes to finance highway construction). These justifications do not apply, other than weakly, to the medical device case. The tax also imposes administrative and compliance costs that may be disproportionate to revenue.

“Open Payments” Website Missing $1 Billion

Just yesterday, we discussed the federal government’s intrusive and mischievous Open Payments website, where payments for consulting and similar services provided by doctors to pharmaceutical and medical-device makers are publicized.

If the people really demand this information, then I recommended that government payments be included at the same website. After all, if people suspect that companies paying experts for their services is inherently corrupt, then they should have the same suspicion of government payments.

The relevant industries, represented by their trade associations (PhRMA, AdvaMed, and BIO) have bought into the Sunshine Law which created the Open Payments database. However, the flawed roll out of the website led even them publicly to express “concern” with the database.

Federal Health IT Standards Pushed Back Yet Again

Sometimes deadlines just slip. The federal government’s deadline for providers certifying “Meaningful Use Stage 2″ in order to get federal funding for their electronic health records (EHRs) has just been bumped yet again:

The Centers for Medicare & Medicaid Services has reconsidered its original position not to extend the deadline for applying for Meaningful Use hardship exemptions and reopened the application submission period through Nov. 30, according to an announcement.

Eligible hospitals (EHs) and eligible professionals (EPs) who have not attained Meaningful Use and have not been granted a hardship exception are subject to “payment adjustments” of their Medicare reimbursement beginning Oct. 1 for EHs and Jan. 1, 2015 for EPs. The previous deadlines for submitting hardship exception applications had been April 1 for EHs and July 1 for EPs.

States’ “Right to Try” Laws Have a “Strange Allure”

Writing in JAMA: Journal of the American Medical Association, Patricia J. Zettler, JD, and Henry T. Greely, JD, both of Stanford University, criticize the “strange allure” of states’ laws that recognize patients’ “right to try” new medicines before the Food and Drug Administration (FDA) approves them.

These laws should help patients get access to medicines that the FDA forbids. However, these lawyers point out that the FDA’s power may overwhelm these laws:

Despite the attention they have received, right-to-try laws are unlikely to give patients more access to unapproved drugs or devices. Under the “Supremacy Clause” in the US Constitution, federal law trumps conflicting state laws. For example, states can repeal their laws against medical (or nonmedical) use of marijuana, but the federal government may still arrest and convict people in those states for violating medical marijuana prohibitions. Although the federal government has chosen to limit its enforcement of federal marijuana laws in certain circumstances, the FDA is unlikely to ignore unauthorized use of unapproved products, especially because the agency already provides physicians with a regulatory pathway for compassionate use.

GAO Says Congress Can Stop Obamacare’s Health Insurer Bailout

Yesterday, the General Counsel of the U.S. Government Accountability Office (GAO) supported the requirement that the Administration needs appropriations to bail out insurers who lose money in Obamacare exchanges in 2015, via risk corridors:

HHS stated that it intends to begin collections and payments under section 1342 in FY 2015. However, as discussed above, for funds to be available for this purpose in FY 2015, the CMS PM appropriation for FY 2015 must include language similar to the language included in the CMS PM appropriation for FY 2014.

This is a very positive development towards protecting taxpayers’ from the unlimited liability to which Obamacare exposes us by protecting insurers’ income statements from losses in Obamacare exchanges. The Administration had assured us that the risk corridors would be budget neutral, but that was not written into the law.

Is the FDA Even Capable of Regulating 21st Century Medical Devices?

The pace of innovation in medical devices is breathtaking. The most exciting developments are in mobile health. One year ago this month, the Food and Drug Administration (FDA) issued its final regulations on mobile medical apps. So far this year, the FDA has approved 23 medical apps that the editors of MobileHealthNews define as “notable.”

The role of the FDA in preventing such apps from reaching patients is of great concern. Mobile technology is so well integrated with other technologies that we now take for granted that FDA regulation of these apps risks giving the FDA power over tools that we’ve used conveniently for years. Many were relieved when the South Korean FDA announced in March that it would not regulate Samsung’s latest Galaxy smartphone!

Massive Momentum for Mega-Mergers in Health Care

Paul Keckley of Navigant Consulting summarizes the rapid pace of consolidation within U.S. health care:

“Go big or get out” seems to be a mandate across the health system these days. Across the continuum of healthcare products and services, consolidation is a given. Consider:

  • Total enrollment of the top 10 insurers increased from 20% in 2003 to 46% in 2011
  • The share of total revenues for pharmacy benefits management services for the top 2 Pharmacy Benefit Managers increased from 27% in 1999 to 61% in 2012
  • The numbers of physicians practicing in groups of 5 or fewer physicians decreased from 66% in 2001 to 51% in 2012, while physicians in groups of 100 or more increased from 3% to 12% in the same period
  • The employment of physicians in medical practices owned by hospitals increased from 24% in 2004 to 49% in 2011
  • The numbers of hospitals in multi-hospital systems increased from 53% in 2003 to 60% in 2013.

Federal Health IT Standards Still Taking On Water

electronic-medical-record

Last May, this blog discussed the proposed watering down of standards for hospitals and other facilities to get federal bounties for so-called “meaningful use” of electronic health records (EHRs) in 2014.

Well, they appear to have done it again. In a final rule that affected both 2014 and 2015, the Office of the National Coordinator of Health Information Technology (ONC) announced that: “Health information technology (IT) developers, providers and consumers will get more flexibility through a final rule issued on Sept. 10, 2014.”